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TIC sees carbon price complications in store

Truck Industry Council is confident demand for gas vehicles will be matched if diesel price soars

By Rob McKay | July 17, 2013

The Truck Industry Council (TIC)
is confident manufacturers will be well placed to handle demand for alternatively fuelled vehicles if the cost of diesel soars due to a carbon trading system.

Such a longer-term scenario is only expected to be possible with a Labor victory in the next election, as the Coalition has ruled out either a carbon tax or an emissions trading scheme (ETS).

While an ETS linked to the European carbon market is estimated to put a price on carbon at $6 a tonne, the European economy will recover somewhat at some time this decade, probably in line with a US recovery.

With it, demand for carbon credits would likely rise as business there accelerates.

Making this a longer term proposition is news today that the European Parliament has rejected a plan by the European Commission, the European Union’s executive body, to inflate the carbon credit price by postponing the auction of 900 million of them.

When the price does rise and if the ETS is in place, “the fuel tax credit changes will be determined on a six-monthly basis, based on the average carbon price over the previous six-months”, according to the Federal Government’s Clean Energy Future plan.

This point was highlighted yesterday by the Australian Chamber of Commerce and Industry (ACCI).

TIC Chief Technical Officer Simon Humphries believes even short-to medium term savings for operators from an early move to
an ETS
might not go too far.

Humphries points out that the limiting of fuel credit reductions to 1.6 cents per litre extra, rather than the 6.858 cents per litre under the carbon tax, could be swamped if National Transport Commission-advised structural adjustment to the road user charge that could add 2-3 cents to a litre of fuel is agreed.

“In effect, there could still be quite a significant jump on 1 July next year but it would be in two components,” he says.

And there could be other unintended consequences.

On the issue of incentives, “we like to have some room in the fuel tax credit to allow the Government to consider variable tax credits depending on the vehicle”, Humphries says.

“If there’s only two cents left, there’s not much to play with.”

He believes that there may be some relief for operators through use of alternative fuels in the longer term, with truck and engine manufacturers likely to have several years of further developments in technology to bring to bear.

But even here, the outlook is clouded, with issues related to the international price of gas and domestic gas production coming into play.

While Humphries estimates that a diesel price of $2 a litre as a tipping point for fleets to consider alternatives seriously, that decision might be complicated by upward pressure on the gas price, due to obstacles to fracking and long-term supply deals with East Asian countries.

Despite all that, developments in alternative fuel propulsion show few signs of slowing.

Amongst a range of other truck and engine brands, Humphries points to Cummins Westport’s 13-litre spark ignition natural gas engine aimed at semi-trailer and lager rigid use in the US that follows its 15-litre heavy duty unit available here.

Isuzu has more models available to support the compressed natural gas light truck currently on Australian streets.

“If there are products not available in Australia yet, they could be,” he says.

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